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ENTERPRISES IN
SUPPORTING SOCIAL
MEXICO
A prioritisation model and an institutional and
public policy analysis of effective government
grant allocation
KAREN SUSANA GONGORA PANTi
University of Twente
To the public defence of my PhD dissertation
SUPPORTING
SOCIAL
ENTERPRISES
IN MEXICO
A prioritisation model and an institutional and public policy
analysis of effective government grant allocation On Friday the 2nd of October
2020 at 16:30 hrs PROF. BERKHOFF-ZAAL BUILDING WAAIER UNIVERSITY OF TWENTE K.S. GONGORA PANTi PARANYMPHS: DR. IMKE LAMMERS SAMIRA DADALTO
SUPPORTING SOCIAL ENTERPRISES IN MEXICO
A prioritisation model and an institutional and public policy
analysis of effective government grant allocation
SUPPORTING SOCIAL ENTERPRISES IN MEXICO
A prioritisation model and an institutional and public policy
analysis of effective government grant allocation
DISSERTATION
to obtain
the degree of doctor at the University of Twente, on the authority of the rector magnificus,
prof. dr. T.T.M. Palstra,
on account of the decision of the Doctorate Board to be publicly defended
on Friday the 2nd
of October 2020, at 16:45 hrs.
by
Karen Susana Góngora Pantí
born on the 24th
of April, 1986 in Campeche, Mexico
prof. dr. M.A. Heldeweg prof. dr. J.T.A. Bressers
Cover design: Ricardo Peña Aguilar Printed by: Ipskamp printing Lay-out: J. Roberto Reyes García
ISBN: 978-90-365-5058-1
DOI: 10.3990/1.9789036550581
URL: https://doi.org/10.3990/1.9789036550581
© 2020 Karen Susana Góngora Pantí, The Netherlands. All rights reserved. No parts of this thesis may be reproduced, stored in a retrieval system or transmitted in any form or by any means without permission of the author. Alle rechten voorbehouden. Niets uit deze uitgave mag worden vermenigvuldigd, in enige vorm of op enige wijze, zonder voorafgaande schriftelijke toestemming van de auteur.
This work was funded by the Mexican National Council for Science and Technology (CONACyT).
Chairman/secretary:
prof. dr. T.A.J. Toonen University of Twente Supervisors:
prof. dr. M.A. Heldeweg prof. dr. J.T.A. Bressers
University of Twente University of Twente Committee Members:
prof. dr. J.S. Clancy prof. dr. P.Y. Georgiadou prof. dr. C.S.L. Minard prof. dr. M. Skutsch dr. N.S. Bosma University of Twente University of Twente Babson College National Autonomous University of Mexico University of Utrecht
Looking back, today I can confirm that doing a PhD was like a race, in which the competitors were myself and my many other “selves” (such as, my sadness, my depression, my frustrations and my disappointments) that, being honest, beat me in many laps. However, at the end, I won the race.
This victory would not have been possible without the support of many, many people. In this part of the book, I would like to thank them.
Firstly, I would like to thank my dear supervisors: Michiel and Hans. Having them as supervisors was truly a privilege. Michiel is a very busy person, however, he managed to find the time to support me and my PhD research. I was always looking forward to his comments. When I thought that I finally got it right, Michiel would make me change my mind and make me think harder and further. I hope he excuses any inconvenience that I might have caused him, because if someone saw me in my worst moments that was him. Sorry Michiel, sometimes I cannot help my passionate spirit that every now and then leads me into troubles. Thank you for all your insightful comments and for being so supportive and kind to me.
Hans appeared half the way of my research and I cannot even describe how lucky I was to have him on board. I am convinced that he has a gift for teaching and guiding his students. After a meeting with him or an exchange of emails, I could feel nothing but motivated. After a discussion with him, I wanted to write two books instead of one. Dear Hans, thank you so much, you reminded me how much I love to study and to learn.
Just as Hans and Michiel, I also met remarkable scholars that helped me at some point of my research, such as Bas Denters, Ringo Ossewaarde, Paul Benneworth (who, unfortunately, is no longer with us) and, of course, Jacques Defourny. Thank you all for the time you dedicated to me, your ideas helped me to get back on track.
Along this way, I also met wonderful people who shared my anguish and my joy, and that of course I would like to thank. When I arrived to Enschede, I met Samira. She has nothing to do with the university or my PhD, but she would know everything because I would always tell her. Samira, thank you for listening to all my complaints, from now on, only fun talks. Kamia and Imke were my colleagues, but they soon became my dear friends. They would always be
or a game night. Thank you so much guys. Also, to my other favorite couple, my godchildren, Liz and Emilio.
During my first year in Enschede, I also met my crazy and loving friend, Daria. She lived in Enschede only for six months, but that was more than enough for us to become friends. Dasha, thank you for all the moments we have shared. At the NIG courses, I met Vera, being with her can only guarantee laughs. Vera, we had a lot of fun in Edinburgh and in Utrecht didn´t we? Thank you so much for that and also for following closely my PhD “soap opera”.
I would also like to thank all my BMS colleagues, especially Alessandro, Barbera, Brayton, Marlies, Minsi, Mónica and Qiansong. Thank you so much guys, I enjoyed our chats and the time we shared together.
While doing my fieldwork, I met wonderful people and I also would like to extend my huge gratitude to them. Tjalling de Vries, who used to work at Gemeente Enschede, helped me when I started my research and I was considering studying social enterprises in Enschede. Likewise, thanks to all the partners of TwenteMove2Social who were very kind to me. Although that study was not possible, I hope this dissertation can contribute to their laudable efforts in supporting social enterprises.
In Mexico, thanks to all the amazing entrepreneurs that I met, especially to Blanca Cervantes, Luis Hernández and Marisol Herrera. Everyone should know the work they do and the hard work and dedication they have put into their companies. Dear entrepreneurs, thank you for being such an inspiration, for your kindness and willingness to share your experience with me. Likewise, thanks to Guillo, Lila and Tía Irma that helped me to get in contact with these entrepreneurs.
I cannot finish these acknowledgements without thanking the people that I have met during my life and that have stayed to cheer me up when I have needed it. Irlanda, you have seen me in all my phases since we were little girls and you have always been there, thank you for that. Also, thanks to my childhood friends: Yeka, Rossy, Majo and Yene; my high school friends: Ale (chinita tqm), Dalia, Arinda and Sonia. One conversation with them and I feel ready to face the world again. Leydi, my friend during my BSc studies and Aliz from my MSc, have also always been there for me that I just wish I would have
could not make more friends, I met my dearest friend Mayrita, David and “los barbones”. Mayrita, the chicken wings were the excuse to see you and have wonderful conversations. David, words are not enough to thank you for all your advice and for being always there to discuss whatever topic with me; my friend, you have my true admiration. “Barbones”, thank you for being there for me, you have no idea how important your jokes were in certain moments. Thank you for all the laughs.
I am getting to the end and I would like to thank the women of my life (…this is the part where my voice cracks). Mami, Taña, ¡las amo! Gracias por mandarme mensajes cada uno de los días durante estos cuatro años preguntando cómo estoy o cómo amanecí. Mami, gracias por ser una mujer tan fuerte y por alentarme a perseguir mis sueños. Taña, mi hermana, mi mejor amiga, gracias por ser como eres y por prestarme a “bebé”, quien es parte importante de mi felicidad. Por supuesto, también tengo que agradecerle a él, a bebé, no sólo por jugar conmigo sino por entender, a tan corta edad, que su tía está ausente la mayor parte del tiempo porque anda persiguiendo sus sueños. ¡Los amo con todo mi corazón!
Finally, I will never have enough time to thank the love of my life, Rober. Rober is supportive, loving, thoughtful... He would sit with me, discuss my topic with me, suffer with me, get nervous, anxious, happy, super happy, just like me. Mamor, you are a big reason to wake up every morning and not to give up. You have no idea how much I love you.
Karen Góngora
List of figures ... i
List of tables ... ii
CHAPTER 1. INTRODUCTION ... 1
1.1. Background and Problem Statement ... 1
1.2. Research Question and Sub-questions ... 5
1.3. Methodology ... 6
1.4. Outline ... 7
CHAPTER 2. DEFINITION OF SOCIAL ENTERPRISES AND THE PRIORITISATION MODEL... 9
2.1. Introduction ... 9
2.2. A Definition of Social Enterprise ... 10
2.2.1. What type of organisation is a social enterprise? ...10
2.2.2. What are the types of products and services that social enterprises can offer? ...14
2.2.3. What is social value? ...16
2.2.4. What do different levels imply for social enterprises? ...20
2.3. Social Enterprises and the Role of Governments ... 22
2.4. The Prioritisation Model for [Social] Enterprises: PRIME ... 25
2.4.1. Landscape of social enterprises by Defourny and Nyssens ...26
2.4.2. A hybrid configuration: Heldeweg´s work as the basis to find nuances among social enterprises ...29
2.4.3. Description of PRIME ...30
2.4.3.1. Mapping social enterprises ... 36
2.4.3.2. Prioritisation of social enterprises: looking for a balance ... 39
2.5. Conclusion ... 41
CHAPTER 3. POLICY INSTRUMENTS SUPPORTING SOCIAL ENTERPRISES AND THE FACTORS THAT INFLUENCE THEIR IMPLEMENTATION ... 43
3.2.1. Definition and types of policy instruments ...44
3.2.2. Selection of policy instruments ...46
3.3. Implementation of Policy Instruments ... 49
3.3.1. Contextual Interaction Theory: Cognition, Motivation and Resources .50 3.4. Institutional Environment Elements ... 53
3.4.1. Organisations and institutions...54
3.5. Conclusion ... 57
CHAPTER 4. SELECTION OF SOCIAL ENTERPRISES SUPPORTED BY THE MEXICAN GOVERNMENT ... 61
4.1. Introduction ... 61
4.2. INAES and the Selection Criteria of Cooperatives ... 63
4.2.1. INAES supporting social enterprises ...63
4.2.2. Selection criteria of cooperatives supported by INAES ...69
4.3. INADEM and the Selection Criteria of MSMEs ... 75
4.3.1. INADEM supporting social enterprises ...75
4.3.2. Selection criteria of MSMEs supported by INADEM ...82
4.4. Conclusion ... 92
CHAPTER 5. SOCIAL COOPERATIVES CASES IN THE MEXICAN CONTEXT ... 95
5.1. Introduction ... 95
5.2. Mexican Legal Framework for Cooperatives ... 96
5.3. The Cases: Cooperative Societies ... 99
5.3.1. Case 1: Production of coffee ... 100
5.3.2. Case 2: Production of organic products ... 102
5.3.3. Case 3: Promotion of eco-touristic activities (Yucatan) ... 103
5.3.4. Case 4: Promotion of eco-touristic activities (Chiapas) ... 105
5.3.7. Case 7: Reproduction of olives trees ... 110
5.4. Mapping and Prioritisation of the Cases using PRIME ... 112
5.5. Conclusion ... 117
CHAPTER 6. SOCIAL BUSINESS CASES IN THE MEXICAN CONTEXT ... 119
6.1. Introduction ... 119
6.2. Mexican Legal Framework of Joint Stock Corporations ... 120
6.3. The Cases: Joint Stock Corporations ... 126
6.3.1. Case 1: Elaboration of craft beer ... 126
6.3.2. Case 2: Provision of catering service ... 128
6.3.3. Case 3: Production of eco-friendly products ... 130
6.3.4. Case 4: Promotion of sustainable tourism ... 131
6.3.5. Case 5: Provision of a courier service ... 133
6.3.6. Case 6: Production of a falls´ detector ... 135
6.3.7. Case 7: Production of salt ... 137
6.3.8. Case 8: Installation of photovoltaic systems ... 138
6.3.9. Case 9: Development of socio-emotional skills ... 139
6.3.10.Case 10: Provision of information to migrants ... 141
6.4. Mapping and Prioritisation of the Cases using PRIME ... 143
6.5. Conclusion ... 149
CHAPTER 7. MEXICAN POLICY INSTRUMENTS SUPPORTING SOCIAL ENTERPRISES: AN ANALYSIS OF THE FACTORS THAT INFLUENCE THEIR IMPLEMENTATION ... 151
7.1. Introduction ... 151
7.2. Institutional Environment Elements... 153
7.2.1. Regulative element... 154
7.2.2. Normative element ... 160
7.2.3. Cultural-cognitive element ... 162
7.3.3. Resources ... 170
7.4. Conclusion ... 172
CHAPTER 8. GENERAL CONCLUSIONS ... 177
8.1. Introduction ... 177
8.2. Summary of the analysis ... 177
8.3. Answer to the main research question and some reflections ... 181
8.4. Policy recommendations and future research. ... 183
REFERENCES... 187
APPENDICES ... 205
Appendix A. Legal environment commonly associated to social enterprises . 205 Appendix B. Questionnaire used in the interviews... 207
SUMMARY ... 209
SAMENVATTING ... 213
Figure 1. Principles of Interest. ... 13
Figure 2. Landscape of Social Enterprises. ... 14
Figure 3. Social value created at any part of the value chain... 20
Figure 4. Governance triangle in Heldeweg’s work ... 30
Figure 5. Traditional forms of organisations with an interest orientation and a profit orientation ... 31
Figure 6. The Prioritisation Model for [Social] Enterprises (PRIME) ... 35
Figure 7. Example of mapping a social enterprise within PRIME ... 39
Figure 8. Policy instruments implemented by governments to influence individuals .. 44
Figure 9. Contextual Interaction Theory applied in supporting social enterprises in Mexico ... 52
Figure 10. Three institutional environments. Governments regulating civil society and markets ... 54
Figure 11. Institutional environment elements: Regulative, Normative and Cultural-cognitive Elements ... 57
Figure 12. The individual characteristics and the institutional environment elements of the actors involved in the implementation of policy instruments ... 59
Figure 13. Process followed by INAES to support new productive projects. ... 65
Figure 14. Results of the selection process of cooperatives supported by INAES ... 72
Figure 15. Geographic distribution of INAES cases ... 75
Figure 16. Process followed by INADEM to support high-impact entrepreneurship. ... 78
Figure 17. Results of the selection process of MSMEs supported by INADEM ... 86
Figure 18. Geographic distribution of INADEM cases ... 92
Figure 19. Organs in charge of the decision-making process in a cooperative ... 98
Figure 20. Distribution of cooperatives supported by INAES, within PRIME... 115
Figure 21. Number of micro, small and medium sized enterprises in Mexico. ... 121
Figure 22. Organs in charge of making decisions in Joint Stock Corporations ... 124
Figure 23. Distribution of joint stock corporations supported by INADEM, within PRIME... 147
Table 1. Functions of government in social entrepreneurship... 23 Table 2. Aspects to consider in the assessment of interest orientations and profit
orientations of an enterprise ... 36
Table 3. Overview of the presence of policy instruments´ characteristics based on the
types of policy networks ... 49
Table 4. Cooperatives supported by INAES in 2015 with high or very high degree of
marginalisation, with more than 10 members or that protect the environment ... 73
Table 5. Cooperatives supported by INAES in 2016 with high or very high degree of
marginalisation, with more than 10 members or that protect the environment ... 73
Table 6. Cooperatives supported by INAES in 2017 with high or very high degree of
marginalisation, with more than 10 members or that protect the environment ... 73
Table 7. Cooperatives selected for the study... 74 Table 8. Impulse to high-impact entrepreneurship of the National Entrepreneur Fund:
Objectives and sub-modes of support ... 77
Table 9. Evaluation criteria and score given per year ... 81 Table 10. MSMEs supported by INADEM in 2015 that help vulnerable people, protect
the environment, contribute to policies and/or to the promotion of culture. ... 87
Table 11. MSMEs supported by INADEM in 2016 that help vulnerable people, protect
the environment, contribute to policies and/or to the promotion of culture ... 89
Table 12. MSMEs supported by INADEM in 2017 that help vulnerable people, protect
the environment, contribute to policies and/or to the promotion of culture ... 90
Table 13. MSMEs selected for the study ... 91 Table 14. Cases supported by INAES per year, their interest orientations and profit
orientations ... 112
Table 15. Stratification of MSMEs ... 120 Table 16. Cases supported by INADEM per year, their interest orientations and profit
orientations ... 143
Table 17. Institutional environment elements and individual characteristics of the
CHAPTER 1
.
INTRODUCTION
1.1. Background and Problem Statement
Over the last few decades, Social Entrepreneurship has emerged as a novel solution to pressing social problems, such as unemployment, environmental challenges or social exclusion (Cunha, Benneworth & Oliveira, 2015). Haugh (2007) claimed that social entrepreneurship is about “the simultaneous pursuit of economic, social, and environmental goals by enterprising ventures” (p. 743). Other experts agreed that it is a process in which an individual identifies a social problem and develops a project designed to solve it (Ogliastri, Austin, Reffico & Gutiérrez, 2006). That is, social entrepreneurship is initiated by social entrepreneurs to create social value through a sustainable project that is concerned with economic, environmental and social aspects (Lundström & Zhou, 2014a; Sud, VanSandt & Baugous, 2008).In addition, Defourny and Nyssens (2008) explained that through that process (i.e., social entrepreneurship), “social entrepreneurs created social enterprises” (p. 203).
In practice, social entrepreneurs are not only individuals, but partnerships, not-for profit organisations, for-profits organisations, the public sector, or a group of them (Di Zhang & Swanson, 2013; Montgomery, Dacin & Dacin, 2012; Short, Moss & Lumpkin, 2009). Social entrepreneurs are supposed to be “disruptive in their approach, pioneering and entrepreneurial” (Nicholls & Hyunbae Cho, 2006), and able to catalyse social change and address social or economic needs (Mair & Martí, 2006; Townsend & Hart, 2008). Given this diversity of actors involved, the actions they are supposed to carry out and the results they should deliver, it is unsurprising that the variety of definitions and the implications of social entrepreneurship and social enterprises get very blurred. In the literature, it is acknowledged that social entrepreneurship and social enterprises are terms that tend to be used interchangeably by some authors, while others establish a difference between them (Emerson, 2006; Luke & Chu, 2013). Following the latter, social entrepreneurship is the overarching concept that includes not only social enterprises but other concepts and activities for social purposes, such as
social innovation (Luke & Chu, 2013; Lundström & Zhou, 2014b). The focus of this research is on defining these social enterprises that are part of the social entrepreneurship.
In spite of the fuzziness of the concepts within the academia, the role of social entrepreneurship and social entrepreneurs is gaining relevance worldwide. They are being more seriously considered and, nowadays, private and public sectors are willing to support projects related to them (Dees, 2007; Zeyen et al., 2013). Governments in Europe, the United States and other parts of the world, or international organisations, such as Ashoka or the Schwab Foundation for social entrepreneurs, promote social entrepreneurship as one key offering solution to their perceived social problems (D. R. Young & Grinsfelder, 2011; Zeyen et al., 2013).
Governments, in particular, play a key role in this trend. It is believed that governments that promote social entrepreneurship activities and develop tools to facilitate the achievement of their objectives have an important impact on the success rate of social enterprises and, therefore, provide structural support to the solution of social problems (Rey-Martí, Ribeiro-Soriano & Sánchez-García, 2016). As a result, public policies exert a great influence on how social entrepreneurship unfolds and, in turn, have an effect on escalating the benefits of social entrepreneurship endeavours, such as job creation, economic growth and reduction of social exclusion (OECD & European Union, 2013).
The support of governments, from all over the world, for social entrepreneurs is expressed differently. Some have implemented regulations, adapted legal forms or simply granted financial support oriented to boost social enterprises (Choi & Majumdar, 2014; López-Cózar Navarro, Priede Bergamini & Rodríguez López, 2015; Santos, 2012). Although there are efforts evident worldwide, it is well-known within the field of social entrepreneurship that this movement of boosting social entrepreneurship activities is found most clearly in Europe and in the United States. In Europe, the movement responds to failure of governments there to fulfil their mission regarding social issues, whereas, in the United States the response is to the lack of financial support to the non-profit organisations (Wulleman & Hudon, 2015).
In the Mexican public sector, the National Development Plan 2013-2018 established the promotion of social entrepreneurship projects as one of its actions (Poder Ejecutivo Federal, 2013c). The National Entrepreneur Fund (NEF) was implemented in Mexico in 2014 to align with that action. The NEF was managed by the National Institute of the Entrepreneur (INADEM, acronym in Spanish), a deconcentrated organ that used to belong to the Ministry of Economy.1 The NEF ostensibly aimed at supporting entrepreneurs and micro,
small and medium-sized enterprises by helping them to increase their productivity (Secretaría de Economía, 2015). High-impact entrepreneurship was driven by this programme, which included social impact projects.
Another public programme emerged in Mexico to support social entrepreneurs in the same period. This programme has been oriented to support entrepreneurs who are constituted as any form of social organisation belonging to the Mexican Social Sector of the Economy. This Programme to
Promote the Social Economy has been managed by the National Institute of
Social Economy (INAES, acronym in Spanish).2 It has aimed to strengthen the
capacities and resources of people with projects leading to financial and labour inclusion (Secretaría de Desarrollo Social y Secretaría de Economía, 2015). According to this programme, a social entrepreneur is a party interested in developing a project in partnership with others and seeking the common good through the generation of products, goods, or socially-necessary services (Secretaría de Economía, 2014b). Furthermore, despite the fact that the main objective of this programme has been to increase the income of the population, the projects supported by INAES have also promoted the growth of the employment as a consequence of their implementation.
Based on the above, in Mexico, brand new projects (or of recent creation, i.e., start-ups), which could be referred as (young) social enterprises, have been supported for being the primary target of the mentioned governmental programmes. However, if the definition of social enterprises remains fuzzy and it is unknown what they actually entail, how can one be sure that they are
1 In 2018, elections were held in Mexico. The new government dissolved INADEM in 2019, but the
supports continue within the Ministry of Economy. The idea of the new government is to give the money directly to the beneficiaries without intermediaries and to give priority to micro and small businesses.
2 This institute currently belongs to the Welfare Ministry (that used to be called Ministry of Social
Development in the former governing period that ended in 2018), but it used to belong to the Ministry of Economy when it was created. This will be explained in chapter 4.
actually being supported? The Mexican government seems to be spending a great amount of resources to support the best enterprises. As an example, from January to July in 2015, the Mexican government spent 2,209 million pesos (108 million euros approximately) boosting this kind of project (Presidencia de la República, 2015). This amount represented almost 25% of the total budget allocated to the NEF in that year.3 It would be desirable that
those enterprises are able to accomplish what, in general terms, social enterprises are supposed to accomplish, i.e., a real positive impact on society.
In this regard, the general objective of this research is to contribute to the body of knowledge regarding Mexican governmental programmes that have supported young social enterprises, and to understand the degree to which they have been fulfilling their mission. To accomplish this general objective, the steps to follow are based on the following five specific objectives.
The first specific objective is to identify the theoretically essential characteristics of social enterprises to set the basis for a model that can prioritise these enterprises and that could be used in the short-term future. To succeed in this endeavour, it was necessary to move from the still ongoing academic debate to adopt stances with respect to the different streams encountered in the literature. For example, this dissertation chose to use the term social enterprises over other terms, such as social entrepreneurship activities or hybrid organisations. The reason behind this decision is, in the first place, the understanding that social entrepreneurship is wider than social enterprises. In the second place, the term hybrid organisation4 was avoided to
prevent confusion related to the ambiguity of the concept of hybridity. Another reason is that social enterprises also imply a set of controversial terms, such as social value, social impact (which also tends to be used interchangeably with social value) and social change, among others. In this respect, the decision was to focus only on social value.
The second specific objective is to identify theoretically those tools that can support social enterprises and those factors that can influence their
3 In 2015, the budget of the NFE was of 8,907, 386,226 millions of pesos (Secretaría de Hacienda,
2015).
4 The contributions of scholars that refer to hybrid organisations are key when looking for forms on how
to maintain social and financial goals overtime, which will help to overcome the “tensions” and assure the “value spillovers” of social enterprises. For more in-depth information about hybrid organisations, see: Batillana (2018); Ebrahim, Battilana and Mair (2014); Santos, Pache and Birkholz (2015).
implementation and effectiveness. These first two specific objectives are intended to be an innovative analytical framework that has the ambition to expand the body of knowledge of social entrepreneurship and policy analysis, contribute to the academic discourse on social enterprises and to the implementation of policy instruments.
The third specific objective is to describe two Mexican support programmes and to select likely social enterprises that have been supported by the Mexican government over a certain period.
The fourth specific objective is to identify the characteristics of the social enterprises that were supported by the Mexican government, in terms of their interest orientations and profit orientations, and prioritise them. The idea is to assess the selection of the supported enterprises, by determining if they are social and how ‘social’ they are, considering the theoretically essential characteristics of the social enterprises. It is important to highlight that the focus is not on evaluating the effectiveness of the grant, but on applying the framework that will be proposed to determine whether the enterprises supported are social enterprises or not.
Finally, the fifth specific objective is to analyse the experience of governmental entities and social entrepreneurs with the implementation of the Mexican support programmes. The idea is to link their experiences with these theoretical factors in ways that can influence the implementation of the tools used in such support programmes. The last two specific objectives will contribute to determining the degree to which Mexican governmental programmes have supported young social enterprises effectively.
1.2. Research Question and Sub-questions
Based on the objectives described above, the research question that leads this investigation is: to what extent does the Mexican government effectively5 support social enterprises, especially ones that are new or
5 Understood as “in a way that is successful and achieves what you want”. Consulted in the online
Cambridge Dictionary: https://dictionary.cambridge.org/us/dictionary/english/effectively, on the 20th of April 2020.
recently created? The following research sub-questions have been derived to answer this question:
1. What are the ideal-type social enterprises and how can they be
prioritised for selection?
2. What tools can governments use to support social enterprises and
what supports or restricts the implementation of these tools?
3. Which of the enterprises and cooperatives that were supported by
the two Mexican support programmes show features of social enterprises?
4. What are the characteristics of the selected social enterprises and
what implications do they have for their ideal-type selection, based on a prioritisation?
5. What are the experiences with the implementation of the two
Mexican support programmes and how do these relate to the factors that can influence the implementation of the tools used by these support programmes?
1.3. Methodology
This dissertation is a qualitative research based mainly on case studies. It is a descriptive and explanatory research that focuses on broadening and applying theory. The following methods were used to respond to each research sub-question.
To answer the first research sub-question, an extensive literature review regarding social enterprises was carried out. This literature review generated the proposal for an ideal-type selection of social enterprises, based on their prioritisation.
To address the second research sub-question, a literature review of policy instruments, institutional environments, organisation theory and contextual interaction was performed. This literature review was helpful to identify the tools that governments can use to support social enterprises and the factors that can support or restrict their implementation.
To answer the third research sub-question, a case study selection was performed. This gathered all the available documentation dealing with the
projects that were supported in the period from 2015 to 2017. This period was chosen assuming that although both programmes started operations in 2014, they were not sufficiently consolidated until 2015. In addition, to comply with the time constraints of this research, it was convenient to assess those enterprises supported until 2017. The selection criteria used in this study responded to theory and also practical reasons. It is exclusively focused on projects supported by the Mexican governmental programmes.
The cases selected that resulted from answering the third research sub-question were used to answer the fourth and fifth sub-sub-questions. Interviews were conducted with at least one member of the enterprises selected. The interviews were conducted mostly face-to-face and, in some cases, via Skype. The theoretical propositions that resulted from the first and second sub-questions were applied in the interviews and in the analysis of the cases to answer these last two research sub-questions.
1.4. Outline
This dissertation is composed of eight chapters, including this introduction. The following two chapters constitute the theoretical framework of this research.
Chapter 2 addresses the first sub-question: what are the ideal-type social
enterprises and how can they be prioritised for selection? The first part of the
chapter is organised using the most common elements of the term, social
enterprise. The second part proposes a theoretical model, with the shape of
a triangle, to map social enterprises according to their interest orientations and profit orientations. It also proposes criteria to prioritise the enterprises for a proper selection.
Chapter 3 gives answer to the second sub-question: what tools can governments use to support social enterprises and what supports or restricts
the implementation of these tools? This chapter introduces policy instruments
and explores conceptual elements related to Contextual Interaction Theory and elements of the institutional environment that might affect their implementation and, thus, their effectiveness. The chapter adjusts these
elements in a context where social enterprises are supported. These chapters are followed by a description of the criteria to select cases.
Chapter 4 addresses the third sub-question: which of the enterprises and cooperatives that were supported by the two Mexican support programmes
show features of social enterprises? It first describes the two programmes
that have supported social enterprises in Mexico. Afterwards, it describes the selection criteria of the projects that were supported between 2015 and 2017. Each support programme responds to its own selection criteria of projects, mainly due to the information available at that stage of the research. However, both of them consider fundamental features of the projects as social enterprises.
The subsequent three chapters analyse the cases using the theory previously explained. Chapters 5 and 6 answer the fourth sub-question: what are the characteristics of the selected social enterprises and what implications do they have for their ideal-type selection, based on a
prioritisation? These chapters draw on case studies as the follow-up to
chapter 2. They describe the cases in terms of their general interest, mutual interest or capital interest. They also describe their profit orientations. Afterwards, the cases are mapped and prioritised based on the model that will be proposed in chapter 2.
Chapter 7 addresses the fifth and final sub-question: what are the experiences with the implementation of the two Mexican support programmes and how do these relate to the factors that can influence the
implementation of the tools used by these support programmes? This chapter
is a follow-up to chapter 3 and uses the same cases as chapters 5 and 6 to analyse the factors that can affect the implementation of the policy instrument.
Finally, chapter 8 summarises the answers to the research sub-questions, presents an answer to the leading question, reflections on the limitations of this research, some pertinent policy recommendations and suggestions for future research.
CHAPTER 2.
DEFINITION OF SOCIAL ENTERPRISES
AND THE PRIORITISATION MODEL
2.1. Introduction
To study social enterprises is to enter into a world where the concepts that define them are commonly used interchangeably (e.g., social enterprise and social entrepreneurship, social value and social impact, social value and social change). This creates numerous interpretations of social enterprises, that also reflect the variety of actors in the field, such as entrepreneurs themselves, governments or non-entrepreneurial actors from the private sector. The range of social enterprises and their activities also are huge, which makes it hard to identify them clearly both in practice and in theory.
This chapter answers the first sub-question of this research, namely what are the ideal-type social enterprises and how can they be prioritised for
selection? The objective is to identify the theoretically essential characteristics
of social enterprises to set the basis for a model that can help governments to prioritise them, and thus, facilitate their selection.
The first part of this chapter starts with a definition that explains the most recurrent elements found in the literature and, in so doing, to avoid misunderstandings, as much as possible. The second part of this chapter illustrates how governments are key players in determining the success of social enterprises. The third part provides a theoretical model that will be used to determine the ‘location’ of different types of social enterprises within the frameworks of interest orientations (i.e., capital interest, mutual interest or general interest) and of profit orientations (i.e., non-for-profit, profit-as-a-means or profit-as-a-purpose). Their location in the model means the social enterprises can be prioritised for selection based on how they can balance various interest and profit orientations. Finally, the last section of this chapter presents the conclusions.
2.2. A Definition of Social Enterprise
Social entrepreneurship and social enterprise are terms that are often used interchangeably (Luke & Chu, 2013; Peredo & McLean, 2006). In this dissertation, an important distinction is made. On the one hand, the term
social entrepreneurship is understood as an overarching process that refers
not only to activities oriented to run social enterprises, but also implies social entrepreneurs, social innovation, among other concepts and activities for social purposes (Luke & Chu, 2013; Lundström & Zhou, 2014b). On the other hand, the term social enterprise is treated as “a form of social business or venture” (Luke & Chu, 2013, p. 765).
It is important to note that, when referring to social enterprises, the variety of actors involved, the actions that they are supposed to carry out and the results that they should deliver, lead to a variety of definitions. To overcome this situation, this dissertation collates the most recurrent elements found in the literature and adopts the following definition:
Social enterprise is an organisation that, regardless of the legal form and the business model adopted, offers a product or a service to create, not only economic value, but also social value, at different levels.6
In trying to avoid possible misconceptions, the underscored elements in the definition given above will be further explained based on literature review, i.e., what type of organisation a social enterprise can be, what types of products and services it can offer, what social value is and what the deployment of its actions at different levels implies.
2.2.1. What type of organisation is a social enterprise?
The start of the movement of social entrepreneurship can be identified to date to, at least in the literature, the end of the twentieth century in Europe and in North America (López-Cózar Navarro et al., 2015; Parente, Lopes & Marcos, 2014).7 In Europe and North America, this movement was initially
6 The term business model is used to refer to those key components of a business such as customers,
competitors, offering, activities, resources (like human resources) and supply of factor and production inputs (Hedman & Kalling, 2003).
identified within the third sector or social economy, although with a focus on different organisations within this sector.8
In the United States of America, the movement of social entrepreneurship was focused on the non-profit sector to promote the level of revenues generated from trading, instead of from donations, public funds or grants (López-Cózar Navarro et al., 2015). The economic crises hindered governments to fund and provide resources to the non-profit sector (Narangajavana, Gonzalez-Cruz, Garrigos-Simon & Cruz-Rios, 2016). The economic crisis of 2008, for example, seriously affected the activities of the non-for-profit organisations in the United States of America for which a great part of their source income was government grants and other public sector payments (Casey, 2012). As a consequence, the non-profit sector here needed to find and implement a new way to compensate for the lack of government support.
In contrast, in Canada and Europe social entrepreneurship activities can be found in cooperatives.9 López-Cózar Navarro et al. (2015) gave examples
about these cases. A good example of the cooperative tradition in Canada are
the Community Economic Development Corporations, created in Quebec to
combat social exclusion. The most outstanding example in Europe is Italy —a country with a strong cooperative tradition. Italy is considered to be the first European country to give impetus to the term social enterprise. With the Law No. 381, approved in 1991, the Cooperative sociali (social cooperatives) were established in order to “ensure the general interest of the community, promotion of people and the social integration of citizens” (López-Cózar Navarro et al., 2015, p. 103).
Nevertheless, in the last few years, new legal forms adapted to social enterprises have emerged. In the United States of America, two new types of legal forms appeared called Benefit Corporation and the Low-profit Limited
Liability Company (L3C). These had the purpose of promoting social
enterprises activities, and above all, the purpose of incorporating not only
8 As Parente et al. (2014) explained, the third sector refers to those organisations that pursue public
good but they do it outside the sphere of the state, and that are privately managed yet without pursuing financial profit as an end itself. Therefore, this sector excludes organisations from for-profit private or public organisations.
9 In Appendix A there is a map that shows the legal environments that are commonly associated with
social enterprises in other countries of Europe and in Latin America, based on López-Cózar Navarro et al. (2015).
profit organisations, “but any organization, which pursues a social purpose” (López-Cózar Navarro et al., 2015, p. 105). The first type is managed as a traditional company, with the key differences that they (i.e., Benefit Corporations) must: first, create a positive impact on the society and the environment; second, they should care for internal and external stakeholders of the company; and, third, they should publish reports on their social and environmental performance. The second type (i.e., L3C) is characterised as being a mixture between for-profit and not-for-profit organisations (López-Cózar Navarro et al., 2015).
Likewise, in the United Kingdom, a new legal form was introduced in 2005, the Community Interests Companies (CIC), “a type of limited company designed specifically for those wishing to operate for the benefit of the community, instead of personal profits” (López-Cózar Navarro et al., 2015, p. 104).
The social entrepreneurship field is expanding. This is reflected by the increase in the practitioner communities, the number and the diversity of social enterprises and the academic research into them (Smith & Stevens, 2010). Moreover, social enterprises are adopting a wide variety of organisational forms all around the world (OECD & European Union, 2013). They can occur within the for-profit, non-profit or governmental sectors (Albert, Dean & Baron, 2016; Austin, Stevenson & Wei-Skillern, 2006). To some extent, it is expected that social enterprises that have adopted a legal form of a non-profit organisation focus exclusively on social purpose, while those registered as for-profits organisations (namely joint stock corporations) tend to see the social purpose as a side effect of their activities (Kuratko, McMullen, Hornsby & Jackson, 2017). However, the aim of a social enterprise should be to reach a balance between the financial and social purpose, regardless of the legal form adopted.
Defourny and Nyssens (2017) developed a theoretical framework that combines the principles of interest that can be found in the overall economy. These are the mutual interest, the general interest and the capital interest
that are illustrated in Figure 1. For example, all associations that are primarily concerned for their own members, like the cooperatives, are considered to have a drive based on mutual interest. On the other hand, the state, by default, is considered to act in the general interest. Other associations’ concerns with
the general interest, such as non-profit organisations, are not as broadly defined as those pursued by the state. Finally, the for-profitorganisations are usually considered to be incentivised by a capital interest.
Figure 1. Principles of Interest. Source: Defourny and Nyssens (2017, p. 2478)
Organisations have been moving towards different interests over the years in response to different circumstances (e.g., non-profit organisations not being resourced by government has caused a movement towards a capital interest). Defourny and Nyssens (2017) proposed four models of social enterprises: 1) The entrepreneurial non-profit model (ENP), 2) the
public-sector social enterprise model(PSE), which are organisations with a general
interest moving towards a capital interest; 3) the social business model (SB),
which encompasses organisations with a capital interest willing to find a balance and move towards the general interest; and, 4) the social cooperative
model (SC) which is about organisations with a mutual interest also moving
towards the general interest. These four models form the social enterprises
landscape (Defourny & Nyssens, 2017), as shown in Figure 2. Section 2.4.1
Figure 2. Landscape of Social Enterprises. Source: Defourny and Nyssens (2017, p. 2479)
This dissertation adopts the idea established by Defourny and Nyssens (2017) that social enterprises can evolve from different traditional forms of organisations, in the knowledge that they should observe the legal environment of the country where they operate.
2.2.2. What are the types of products and services that social enterprises can offer?
One reason why social enterprises are so difficult to identify is the many and varied types of products or services they can offer. The following presents some examples.
A well-known example of a social enterprise within the for-profit sector is the project run by Muhammud Yunus from Bangladesh. He realised that small loans for poor people could make a difference in society, so he created the
Grameen Bank.10 This project has as its main objective to financially assist that
sector of society that could not receive this kind of assistance otherwise (Grameen Bank, 2017).
An example of a social enterprise registered as a non-profit is
LivelyHoods.11 Its purpose is to create jobs, particularly for youth and women
in Kenyan slums through the distribution of life-improving products, such as solar lamps, clean-burning cook stoves and household appliances. The young people and women become sales agents developing professional skills and, at the same time, improving the environment by the use of solar products. Another example of a non-profit organisation is ¡Échale! A tu Casa in Mexico.12
This organisation believes that low-income families can have decent housing through self-building. This social enterprise lends money at affordable interest rates and promotes features, such as rainwater harvesting, energy efficient stoves and composting and the use of Adoblock made from local soil.
An example of a cooperative that is considered a social enterprise is
Chernomorka, ‘woman from the Black Sea’.13 It is a Bulgarian clothing
cooperative that focuses on employing disabled people (currently over 100 employees). They produce clothing for babies with 100% natural materials (European Commission, 2013). In Italy, la Cordata Hostel is a cooperative providing accommodation in Milan and Rome to women and young men who have been referred by the municipality’s social services as being at risk of social marginalisation (Social Enterprise London, 2011). Their common background is that they all come from dysfunctional families or may have been living in a children’s home. In these residences around 60% of residents are private payers who are students. These students pay a much lower rent than in the open market, while the municipality pays for the target group (Social Enterprise London, 2011).14
Examples of Community Interest Companies from the United Kingdom
are Warm Wales and Blues and Beers. Warm Wales provides homes with
affordable warmth in its efforts to alleviate fuel poverty in partnership with the public and private sector.15Blues and Beers is an annual music festival held in
the Oxfordshire village of Wallingford where local producers offer artisan
11 For more information, see: https://www.livelyhoods.org/about-us#who-section 12 For more information, see: https://www.echale.com.mx/quienes-somos/
13 For more information, see: http://www.chernomorka.com/info.php?info_id=10&lang=en 14 For more information, see: http://socialeconomyaz.org/wp-content/uploads/2011/06/Social
CooperativesInItaly.pdf
beer.16 There are over 60 volunteers involved and the profit from the festival
is reinvested in regional youth projects.
An example of a Benefit Corporation in the United States of America is
King Arthur Flour.17This enterprise is 100% employee-owned and produces
flour that generates revenue from which they give donations to environmental non-profits organisations.
These examples show that a social enterprise can adopt any type of organisational form to offer products and services in the same way as any other enterprise. What makes them different is that at any part of the value chain (procuring supplies, employing workers, designing the product/service, producing the product/service, marketing to target customers)they can create social value (Dees & Battle Anderson, 2006).18
But, what does social value mean?
2.2.3. What is social value?
The definition of social value is mostly taken for granted in the literature but covers a wide spectrum of similar concepts, such as social wealth, social
capital, social change and social impact. Defining social value, or at least
generating an understanding, would help avoid confusion.
Social value is at the fore in the social entrepreneurship and social enterprises literature. Experts in the field variously explain the concept as the element that social entrepreneurs should aim to maximise (Seelos & Mair, 2004), deliver (Ebrahim et al., 2014; Weerawardena & Sullivan, 2006),
develop (Martin & Osberg, 2007) or create (Austin et al., 2006; Choi &
Majumdar, 2014; Dees, 1998; Lundström & Zhou, 2014a; Peredo & McLean, 2006; Perrini & Vurro, 2006; Sekliuckiene & Kisielius, 2015; Sullivan Mort, Weerawardena & Carnegie, 2003). But, what is precisely that
thing that should be maximised, delivered, developed or created? That is, what
is social value? Choi and Majumdar (2014) concluded that it is difficult to
16 For more information, see: https://www.gov.uk/government/case-studies/blues-and-beers 17 For more information, see: https://www.kingarthurflour.com/
18 According to Michael Porter (2001), the value chain consists of the physically and technologically
distinct activities a firm performs (i.e., the value activities), and of the margin, that is the difference between total value and the collective cost of performing the value activities. Therefore, when talking about the value chain, the value activities should include the “after sale service” as one more value activity, and also the margin. For matter of simplicity, this dissertation will be using just the mentioned value activities by Dees & Battle Anderson (2006): procuring supplies, employing workers, designing the product/service, producing the product/service, marketing to target customers.
identify a precise definition of social value and define exactly what activities it actually entails.
Definitions of social value vary considerably. One example given by Cunha, Benneworth and Oliveira (2015, p. 637) defines social value as the “value that accrue (sic) to society from social entrepreneurship/social innovation initiatives and that allow (sic) to solve social problems and create social capital”. This definition considers the terms ‘value’ and ‘social capital’, which are themselves also difficult to define. An alternative example defines ‘social value creation’ as the “process involved in entrepreneurial action, where the value is created and remains present in the social outcome or change that occurs, instead of in monetary profit” (Pierre, von Friedrichs & Wincent, 2014, p. 59). This definition adds the term ‘creation’, which focuses on the procedure to obtain what is not defined as yet (i.e., social value). Another example by Acs, Boardman and McNeely (2011, p. 787), states that “at the individual level, social value is what a person values more than the money paid, such as a computer or a prescription”. In economics, this definition could be associated with the term of ‘consumer´s surplus’, i.e., “the amount which the consumer would be willing to pay, if he could not get any of the commodity otherwise, for the opportunity to buy, at the existing price, the amount which he is in fact buying” (Henderson, 1941, p. 117).19
Those examples show us, without doubt, that to define social value is a difficult task as the concept value itself is quite controversial.
The concept of value used in social and behavioural sciences and economics derives from the basis established in philosophy (Pauls, 1990). Evidence found in philosophy research shows that, in certain contexts, a wide variety of meanings is given to value. This concept is, on the one hand, associated with the perception of good or bad as an attribute of an individual, a nation or a society (Li, 2014). This means that value is partially dependent on their standards, beliefs, principles, moral obligations and social norms (Pauls, 1990; Rescher, 1969). On the other hand, value can be understood as a relation (Li, 2014; Marías, 1980; Smart, 1931). This relation can be an object-subject relation in which value is the meaning of an object given by a subject (Li, 2014). Moreover, the idea of such meaning has evolved and
19 Henderson (1941) suggested this definition as the Marshallian consumer´s surplus. According to
created several approaches among philosophers. For example, according to Li (2014), value can be classified either from the perspective of an object or a subject. For the object, the usual expression is “‘value of something’” when value “could be categorised into three types: value of a thing, value of spiritual and cultural phenomena and value of a human being” (Li, 2014, p. 68). For a subject, “the value of an object is assessed by the subject´s needs and the extent to which these needs are being satisfied”, usually expressed as “‘(something has) what value’” and where social value simply refers to the satisfaction of social needs (Li, 2014, p. 69).
Some researchers claim that social value can be created when a social entrepreneur addresses problems or tries to satisfy social needs (Doyle Corner & Ho, 2010; Mair & Martí, 2006). These could be very basic humanitarian needs, such as “food, water, shelter, education and medical services to those members of society who are in need”,or could be needs whose provision “can be a matter of life or death for those who receive them” (Certo & Miller, 2008, p. 267; Seelos & Mair, 2005, p. 244).
Social entrepreneurs operate in ways that do not satisfy needs through charity, but through earned-income activities. As such, they can satisfy social needs by generating income for the economically disadvantaged, for example, through employment opportunities, skills development, community cohesion, goods and services that people need and/or desire, among others (Di Domenico, Haugh & Tracey, 2010; Doyle Corner & Ho, 2010; Seelos & Mair, 2004). Considering these examples, social value can be generated in any part of the value chain.
Some authors claim the creation of social value should benefit to all society and not just those directly involved in exchanging the goods or services. This has been termed a ‘positive externality’ (Auerswald, 2009; Lumpkin, Moss, Gras, Kato & Amezcua, 2011; Singh, 2016). This idea support those who claim that activities designed to create social value inherently bring benefit to the society as a whole (Lumpkin et al., 2011; Smith & Stevens, 2010). By contrast, Young (2006) suggested that social value benefits only those people who are disadvantaged.
The literature on social entrepreneurship has become more all-encompassing, as some authors include characteristics or qualities for a better creation of social value. For example, in the provision of resources to
social enterprises, effectiveness is guaranteed better when the provision is accompanied by the knowledge necessary to maintain access to resources (Hazy, Moskalev & Torras, 2009). Another example is where a social enterprise creates social value through the display of certain characteristics, such as innovativeness, proactiveness and risk management (Weerawardena & Sullivan, 2006). Lastly, when organisations come together and deploy resources in partnerships with others, then the opportunity to create social
value is greater than when operating individually (Austin, 2006).
Measuring social value allows one to evaluate, control, promote, learn and improve the activities and results of social enterprises (Behn, 2003). Haugh (2006) states that measuring will “help social and community enterprises prove their effectiveness in achieving economic, social and environmental goals to stakeholders” (p. 200).
Unfortunately, it is very difficult to measure social value (Austin et al., 2006). Standardised tools are lacking that allow, among other things, comparability (Nicholls, 2015). There are numerous examples of tools that have tried to measure social value, including: Social Return on Investment (SROI); Key Social and Co-operative Performance Indicators (KSCPIs); Global Reporting Initiative (GRI); Impact Reporting and Investing Standards (IRIS); among many others (Wood & Leighton, 2010). All come with advantages and disadvantages. R. Young (2006) states the following regarding metrics:
people will come to see [metrics] as a description of a reality, rather than as a tool for a conversation about that reality…It is worrying that some metrics, such as social return on investment (SROI), appear to promise a finer grained accuracy, though they are, in fact, built on much looser assumptions (p. 64).
In summary, and building on this previous discussion, social value created by a social enterprise in any part of the value chain can be understood as:
The outcome derived from fulfilling basic social needs or from contributing to alleviate a social (or environmental) problem, as a result of practicing earned-income activities.
For instance, LivelyHoods, the enterprise example mentioned above, by selling household appliances, is able to employ vulnerable people. Échale a tu
casa! commercialises a construction product to benefit low-income families
that would not have decent housing otherwise. By doing this, the two enterprises are creating social value, as shown in Figure 3. However, these
social values remain difficult to measure and compare because the social
value generated by employing vulnerable people is different to the social value
created by producing a product for low-income families.
Figure 3. Social value created at any part of the value chain
To ensure the creation of social value in the context of social entrepreneurship it is advisable to have a social entrepreneur with certain qualities and who makes use of certain tools to address problems or satisfy social needs at any stage of the value chain. The main objective of the social
value is to bring benefit to the people directly involved and to society as a whole,
preferably to those who are relatively disadvantaged.
2.2.4. What do different levels imply for social enterprises?
Social enterprises can create social value at different levels. This implies that their scope is geographically focused, for example, at the local or national level. It also implies that their scope may depend on the scale or current perception of a problem. In this sense, a social enterprise creating social value in favour of local climate mitigation, for example, is also creating social value
LivelyHoods
Procuring
supplies Employing workers Designing product/service
Producing product/service Marketing and sale Employ vulnerable people Échalea tucasa! Procuring supplies Employing workers Designing product/service Producing product/service Marketing and sale Construction product for low-income families Result/outcome=
Social Value
Result/outcome= Social Value
at a global level illustrating how a social enterprise can act locally, while creating global social value. In a few words, the level at which social value can be created is not defined or restricted by territories.
Commonly, social entrepreneurs who identify local social needs also try to use local partners and resources to address these issues (Dufays & Huybrechts, 2014). Zahra, Gedajlovic, Neubaum and Shulman (2009) call these social entrepreneurs, who focus on local social problems, social
bricoleurs. They say that without social bricoleurs, local social problems would
be overlooked. However, they are such small local initiatives that governments, media or investors often disregard them.
What a social bricoleur does at a local level in a specific context can be adapted to a different local context (Smith & Stevens, 2010). Sometimes, the replication cannot be exact, but, at least, the process might be replicable (Seelos, Ganly & Mair, 2006).
Moreover, the aforementioned authors (Zahra et al., 2009) also identified two other types of social enterprises: social constructionists and social
engineers. A social constructionist addresses those problems that existing
institutions are unable to solve. In most cases, these problems require substantial resources that are difficult to obtain. A social engineer “identify systemic problems within the social systems and structures and address them by bringing about revolutionary change” (p. 526). To succeed in their endeavour, these social entrepreneurs require legitimacy through popular support because they are considered a threat to the interest of established institutions. In the words of Swanson and Di Zhang (2010):
(…) social bricoleurs address social needs at a small scale and local level while social constructionist can be larger in size and operate from a local to an international level, and social engineers are large in scale and operate nationally or internationally (p. 79). On the basis of the points stated above, the problem a social enterprise addresses can sit at different levels; territorial and relating to the extent of a problem.
2.3. Social Enterprises and the Role of Governments
Scholars in the field agree that, apart from the profits from their market activities, social entrepreneurs rely on a variety of funding sources and support that can come from their own members, from the private sector and from government (Austin et al., 2006; Desa & Basu, 2013; Lundström & Zhou, 2014b; Martin & Osberg, 2007; Nicholls, 2009; Swanson & Di Zhang, 2010). Examples of support from their own members include: membership fees, savings or volunteer time. Examples of support from the private sector are foundation grants or philanthropic donations. Examples of support from the government are donations, grants and/or subsidies.
Ideally, all social enterprises should be self-sustaining through their own for-profit activities. However, in some cases, early financing from government is deemed fundamental (Bacq, Hartog & Hoogendoorn, 2013; Lundström & Zhou, 2014b; OECD & European Union, 2013).
Besides the financial support that governments can offer, they also play a very important role as regulators and as promotors of social enterprises. As a regulator, governments must guarantee competitive market conditions, which can be achieved through laws, regulations, or taxation (Mulgan, 2006; Santos, 2012; Schneider, 2016). As a promotor, the role of governments is to foster social entrepreneurship within society; presenting them as something desirable (Steyaert & Dey, 2010). Also as promotors, governments train social enterprise managers or stimulate a strong financial place in the market through giving incentives to banks (OECD & European Union, 2013).
Shockley and Frank (2011) identified four functions of governments as enablers or inhibitors in social entrepreneurship that depend on the state capacity and origins of social entrepreneurship. In this sense, as shown in
Table 1, the four functions of a government in social entrepreneurship are as
follows: 1) an originator and implementer, 2) a bungler, 3) an adapter and promoter and 4) an imitator and adopter (Shockley & Frank, 2011).
